Episode 42: Opsware (with special guest Michel Feaster)

[0] So we also grade acquisitions.

[1] David and I will each give it a grade, and our guests can opt to either grade or not, especially since you were part of it.

[2] I'm happy to grade.

[3] Yeah.

[4] All right.

[5] Welcome back to episode 42 of Acquired, the podcast about technology acquisitions and IPOs.

[6] I'm Ben Gilbert.

[7] I'm David Rosenthal.

[8] And we are your hosts.

[9] Today we are covering the 2007 acquisition of OpsWare by HP.

[10] We have with us a fantastic guest, Michelle Feaster.

[11] So David will give Michelle's full bio in a minute, but I want to say I'm personally very, very excited to have Michelle with us.

[12] A lot of people know the story of the deal from the Opsware side, as told in Ben Horowitz's The Hard Thing About Hard Things.

[13] So Michelle was the director of products for the division that purchased Opsware, and is going to share the story from the HB.

[14] side of that acquisition today.

[15] So, David, can you tell us a little bit about Michelle's background?

[16] Yeah.

[17] So Michelle today is the co -founder and CEO of UserMind, which is a unified customer engagement hub based in Seattle and that she founded in 2013.

[18] But as Ben was alluding to, a decade ago before UserMind, Michelle was working at the opposite end of the tech spectrum from a startup.

[19] She was the director of product for a division of human.

[20] Belit Packard's enterprise software business, where she led the acquisition of Ben Horowitz and Mark Andreessen's legendary company Opsware for $1 .6 billion.

[21] And most fun, flash forward to today, and the tables have turned.

[22] Ben Horowitz is now on her board, a user mind on behalf of Andreessen Horowitz, his venture capital firm.

[23] And we are honored to have Michelle on the show to cover this deal.

[24] So thank you for joining us.

[25] Thanks for having me, guys.

[26] Really excited.

[27] Yeah, we appreciate it.

[28] I appreciate it.

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[51] Thanks, ServiceNow.

[52] David, do you want to take us through the acquisition and history and facts?

[53] Yeah, as always.

[54] So as Ben alluded to, we're going to try and focus mostly on the HP side of the story with Michelle, because much ink has been spilled about the opsware side.

[55] And if you haven't heard about Opsware, we totally recommend reading the hard thing about hard things by Ben.

[56] It is such a great book.

[57] And there's also a really great sort of period piece that WIRE did in August 2000 right before the tech bubble burst, all about the company and about Ben and Mark and Mark's sort of second act after Netscape.

[58] So we'll link to that in the show notes.

[59] And that provides a really good full history of opsware.

[60] But to sort of set the stage, I'm going to take sort of five minutes and do a quick truncated history, just so we're all on the same page and can then dive in with Michelle about how HP viewed things.

[61] So the company that ultimately became Opsware was founded as a different company called LoudCloud, and it was started in September 1999 by four people, Mark Andreessen, who had been the co -founder and CTO of Netscape.

[62] and was famously the Internet's golden boy on the cover of Time magazine, among many other press outlets, and Ben Horowitz, who was the CEO of LoudCloud, and Ben had been a PM for Mark at Netscape, and two other folks, Tim Hous.

[63] Howes was the CTO of Netscape's server division, and he was a total expert in sort of internet infrastructure and plumbing.

[64] He created LDAP, the lightweight directory access protocol, which if you use any sort of, you know, internal company directory service or log on service these days, it's probably based on that.

[65] Pretty amazing.

[66] And then the fourth person was a guy named Sikri, and Sik, I believe, had briefly been part of Netscape.

[67] But when Netscape got acquired by AOL, he was CTO of the e -commerce platform.

[68] platform division within AOL.

[69] So that was the division, and this becomes important for LoudCloud, that when companies back in the day did deals with AOL to be part of the sort of walled garden and sell things on via e -commerce through AOL, they needed to spin up sort of microsites to do that quickly.

[70] And Rhee was kind of in charge of helping them, helping, you know, Nike or whatnot do that at AOL.

[71] And so the idea for what LoudCloud would be, it actually comes from sick, from REE.

[72] And the idea was basically that it would be AWS, before AWS.

[73] It was going to be an infrastructure -as -a -service product.

[74] And the idea was that just like these companies who didn't have software developers or internet infrastructure teams, you know, like Nike or L -L -B or whomever, needed to up websites to sell on AOL, they would also need to do that on the broader internet.

[75] And why would they go build their own teams to do this?

[76] They should just use a service to do the infrastructure for them.

[77] And that was both, David, that was the human power as a service as well as the actual servers as a service, right?

[78] Well, I think it was mostly the servers as a service.

[79] Because remember, the idea of the cloud doesn't really exist in these days.

[80] If you wanted to build a website, the first thing you had to do was go buy a bunch of servers and stick them in a closet somewhere.

[81] Yeah, yeah.

[82] And so that's what LoudCloud was sort of designed to be your virtual servers.

[83] But by the way, that is why they partnered with EDS.

[84] So later there's a big transaction they did with those guys, and that was for the managed service offering.

[85] So Ops were sold the AWS element, and they partner with EDS to provide a full managed service.

[86] and that'll be a chapter and the later element of their story.

[87] To come.

[88] But there's this great Mark Andreessen quote from the first press briefing that they do about the company when there's so much buzz around this company before they even launch because these are obviously sort of early, the first generation of tech celebrities and this is their second act.

[89] And the quote from Mark is that it's like providing the electric power grid and companies can plug in.

[90] And I just thought this was so awesome because we'll also link in the show notes when Jeff Bezos launches AWS later in the mid -2000s.

[91] He goes and he talks at Y Combinator.

[92] And he uses this exact analogy for AWS.

[93] So he's literally, I didn't realize this.

[94] I don't know if Jeff realized this if he came up with it independently or not.

[95] But he is literally using the same analogy that Andresen used when he was launching LoudCloud.

[96] Wow.

[97] And so, Michelle, I mean, we'll get into this in tech themes.

[98] But clearly, AWS, huge successful business right now, LoudCloud, not a huge successful business.

[99] Then, why, you know, obviously timing is the issue, but what was it about the timing?

[100] Well, I mean, I think, you know, look at the readiness of the Internet for enterprise cloud adoption.

[101] I mean, the reason to me Bezos is so successful today is one, you know, development is so much more pervasive.

[102] So the number of people who could leverage AWS has exploded.

[103] Number two, the cost of starting a .com.

[104] company has gone to zero.

[105] So the number of targets who would be, you know, leveraging something like AWS is so much greater now.

[106] And three, I think security, privacy have evolved enough that companies are actually willing to build.

[107] So you, you know, the number of kind of target enterprises, your deal size, all of these elements around kind of go to market have finally matured to where AWS is not an idea.

[108] It's a business.

[109] And there's also, there's another really big piece of this, which is that the whole concept of virtualization, server virtualization, didn't really exist yet.

[110] Like, it sort of existed.

[111] The company, VMware, which listeners may or may not be familiar with, but it's one of the largest enterprise software and infrastructure companies in the world.

[112] It's majority owned by EMC these days.

[113] What they do, they created a product that was just starting to take off around this time, but wasn't widely used that essentially let you take physical server machines and slice them up into multiple virtual machines.

[114] So one box could serve multiple customers essentially.

[115] And that was a big key for making something like AWS work because without that, you needed, you know, essentially a separate box for everybody.

[116] And that was not yet a paradigm that existed in these days.

[117] Yeah, it feels like that would hamstring Amazon these days.

[118] I don't know.

[119] Well, you know, now we're on to containers, right?

[120] That whole technology's emerged.

[121] By the way, you know, on our side, when we were doing the deal, virtualization is a key reason why HP needed to buy Opsware.

[122] So it's not really just about, you know, do you need virtualization to be able to run an effective, you know, AWS offering?

[123] It's what problem does that create in IT?

[124] And so one of the central reasons to me for OpsW's growth is that as virtual virtualization exploded in the IT infrastructure, the old human way of managing servers and networks and storage couldn't scale.

[125] And so, you know, one of the single biggest reasons for their success was the exponential growth and complexity that virtualization drove in IT.

[126] So if you look at, you know, opswheres, you know, as it went from LoudCloud later to become opsware, you know, its growth from, you know, whatever, 4, 10 million to, you know, 80 or 100 million at its exit, you know, virtualization was the top.

[127] technology that drove the majority of their market opportunity.

[128] And it was a big factor in our belief that we needed to be and own the technology, right?

[129] That this was a key control point in the future of how IT was going to work.

[130] Yeah.

[131] And well, we'll come right back to that.

[132] But in the meantime, this isn't really what Loud Cloud is trying to do.

[133] They're trying to be AWS.

[134] And there's so much hype.

[135] And we'll just run through really quick.

[136] sort of the corporate timeline.

[137] And fortunately, Ben Horowitz himself made a nice little truncated version in a blog post that we'll also link to in the show notes.

[138] But this is 90s bubble era internet at its finest.

[139] So November 99, before launching the product, LoudCloud raises $21 million at a $45 million pre -money valuation.

[140] And Andy Rackcliffe at Benchmark led that round.

[141] January 2000, so just a couple months later, they raised another $45 million in debt from Morgan Stanley of all places.

[142] They haven't even launched a product yet.

[143] A few months after that, June of 2000, they raise $120 million at a $700 million pre -money valuation.

[144] And then things start to go a little rocky.

[145] But nonetheless, the company sort of perseveres.

[146] They do end up going public in March of 2001.

[147] They list on the NASDAQ.

[148] They raise another $160 million, but the valuation goes down from the last private round.

[149] Echoes of this happening again today.

[150] So they have about a $480 million market cap.

[151] And then the whole world just blows up the tech world.

[152] And all of the customers for LoudCloud were these, you know, pets .com era startups and they just go about a business.

[153] And so there's essentially no business left for LoudCloud for the AWS managed service product.

[154] So in August of 2002, as Michelle was alluding to, they sell that business to EDS, which is Ross Perrault's software company.

[155] And what does EDS stand for?

[156] Is it electronic data service?

[157] I think it's electronic data systems.

[158] They sell that for just over $60 million, but that's the whole business.

[159] There is no other business within the company, and Ben writes about this at length in the book.

[160] But what they do have is this technology, this sort of internal tool that they'd created called Opsware.

[161] And Tim Howe, the guy who invented LDAP previously at Netscape, he had created this tool within LoudCloud that was basically an automated way to provision.

[162] and then deploy and manage all the servers that they had in their data centers.

[163] And they sort of have this idea that like, okay, loud cloud isn't working at all.

[164] Let's get rid of it.

[165] We have this tool.

[166] We use it.

[167] We think it's great.

[168] Maybe other customers who have big data centers would want to use this.

[169] So they essentially completely pivot as a public company after the tech bubble burst.

[170] And they start down this journey to build an enterprise software company selling data center technology.

[171] So Michelle's shaking her head over there.

[172] What's going through your head right now?

[173] Well, I mean, that's an almost impossible task.

[174] I was hearing it read about, you know, I obviously got to know Ben much later in his life.

[175] But, you know, it's hard enough to build.

[176] So think about how hard it is to build shrink wrap software that you're going to sell and install at a customer when you know you're going to do it.

[177] And this is before SaaS, right?

[178] So his stuff was all on prem.

[179] And they had to take basically tooling that.

[180] was built for internal ops people to manage customer environments and turn it into a shrink wrap product.

[181] And so, you know, you just think about like the usability of stuff you would build for like, you know, internal use versus a UI for customers.

[182] Oh, yeah.

[183] You know, and the level of complexity you tolerate.

[184] And so just, you know, the amount of heroic effort that it must have taken to get that product to be, you know, a real product, I think pretty huge.

[185] On the flip side, if you think about it, you know, they built something that was ahead of its time because their business was so complex.

[186] And, you know, to my earlier point, as enterprises start to adopt virtualization, they start needing something that looks very much like what they built for their own internal management.

[187] So, you know, is it crazy or genius?

[188] I don't know.

[189] But talk about, and I can't even imagine doing that public.

[190] Like, that would be incredibly hard as a pivot if you're, you know, a private venture -backed company.

[191] Never mind you're on the stock exchange.

[192] Right.

[193] Right.

[194] Just for context.

[195] Go ahead, Ben.

[196] Yeah, I mean, we'll get into tech themes later, but thinking about my job all day in working on an early stage idea and doing customer validation, you have to always find a proxy for your customer and figure out, you know, would someone use this?

[197] Is this feature useful?

[198] Try and get inside their head and be into it what the customer might want.

[199] But, you know, Michelle, you said on the flip side, like they were their own customer and they were years ahead.

[200] So they were kind of, you know, building something that was going to be valuable a few years in the future once all the dust settled with absolute perfect information on what the necessary components of that thing were.

[201] I mean, the perfect scenario there is they had the persona 100 % right.

[202] They were building tooling for server admins who were needing to manage environments at scale with multiple applications in there.

[203] And that's the way IT began to look five years after they started selling that software.

[204] So you're dead right.

[205] Probably their biggest advantage was they were ahead in kind of the kind of software operation they were building.

[206] And they had the persona 1 ,000 percent dialed in because they had lived that pain, right, all day, every day, trying to run that service offering.

[207] So, you know, with the challenges came huge advantages that they were able to parlay into an incredible software company.

[208] Yep.

[209] And I'm wondering, I mean, given that you both saw this when you acquired the company, from the outside, but now, you know, you're a founder and CEO of an enterprise company.

[210] I mean, what, when you founded UserMind in 2013, how long did it take you and how long did you work on building the product before you felt that it was ready to ship for customers?

[211] You know, you knew the customer persona when you started, but, you know, just so we have context and our listeners have context, like, how hard is this task?

[212] Oh, it's really hard.

[213] I mean, we spent four months interviewing.

[214] So for me, just to think about and define the persona, the use cases, the product, four months of interviews, probably 300 interviews, just to kind of get to a set of requirements.

[215] And then we went through multiple iterations.

[216] So probably it took us two and a half years to go from an alpha or prototype alpha beta to launch the software publicly and begin selling it.

[217] And, you know, look, necessities the mother of invention.

[218] So they had to do what they were doing or fail.

[219] And I'm sure that was, you know, that gritty determination was another, you know, big part of their later success.

[220] But that's a pretty hard turn to make, right, to take that software and figure out how to package it up.

[221] And I would imagine a lot of their challenges were UI related, right?

[222] Where how do we now expose this tremendous tooling and IP into an application, right, that users can use who are not opsware employees.

[223] And oddly enough, by the way, I never really talked to Ben about that part of their history.

[224] it never spent a lot of time talking about this particular moment in time.

[225] Well, what's funny is, you know, you'd imagine, I think if I went through this, I'd probably never want to talk about it again, but Ben went and wrote a whole book about it.

[226] Yeah.

[227] Yeah.

[228] I mean, I feel like he's the first, not investor, but first CEO who essentially exposed the myth that it's all perfect all the time and kind of gave, I think, CEOs and leaders permission to talk about all of the hard things, right, that really make, or what he calls the struggle.

[229] I remember what I was going to found and he told me, you know, your hardest challenge is going to be managing your own psychology.

[230] And he's, you know, dead right.

[231] And to me, his book gives people permission to talk about what that's really like.

[232] Yeah, I never attributed to that, but you're right.

[233] The last few years, it does seem like the, the climate of okayness to talk about these things is dramatically increased.

[234] Yeah.

[235] I think he was a big part of it.

[236] I don't remember.

[237] And, you know, and I wasn't an entrepreneur.

[238] You know, Ben is the person who changed my life and kind of got me out of Mercury and into startups.

[239] But, you know, I think, at least in my mind, that permission from someone like him to talk about the truth, you know, it's a great gift.

[240] So you mentioned Mercury just for context for, for our listeners.

[241] So you, the way you came to HP was you had been at Mercury Interactive, right, which HP had acquired shortly, but, before the OpsWare acquisition.

[242] Yeah, sad day.

[243] Sad day when H .P. acquired Mercury.

[244] Yeah, I loved Mercury.

[245] I mean, we weren't looking to be.

[246] All acquisitions are hard on all sides.

[247] So what was Mercury and how did you come there?

[248] And what ended up being the fit that you saw between what Opsware became and Mercury?

[249] Yeah.

[250] Well, so one, so I was at Mercury for almost eight years.

[251] I was originally in the pre -sales organization, and for people who don't know, it's like technical sales, right?

[252] You're going out and installing software, and you're kind of the technical half of the selling motion in an enterprise software company.

[253] And I joined Mercury, probably about 200 people or 250 employees, and I stayed through 3 ,000, through almost a billion in revenue.

[254] So it was an incredible experience.

[255] I bet.

[256] Really amazing.

[257] Yeah.

[258] And I spent half my time there in the field and in New England and, in fact, you know, started out really just, you know, P -O -Cing.

[259] and selling technology, and I was very blessed.

[260] As the company scaled, I ended up owning more strategic accounts from a technical pre -sales perspective.

[261] And so when you're selling to GE or Fidelity, they'll say, no, we want a three -year roadmap with Mercury.

[262] We want to talk about how to partner strategically.

[263] And so I started to work very closely with a product organization and eventually moved out to the California and took my first product role.

[264] And I was very blessed.

[265] So I was the second product manager of a product called Load Runner, which when I took over that product was already a $250 million business.

[266] It had 65 % market share.

[267] Customers loved it.

[268] The product worked.

[269] And so I learned product management or how to think about product strategy, you know, taking over an incredibly successful business.

[270] And so I was given such freedom to put it in telesales, put it in partners, innovate on the product.

[271] And I can't imagine a better school of product management.

[272] And I, you know, rotated around.

[273] I basically managed all pieces of the testing business.

[274] And then when we got acquired by HP, my boss called me and said, hey, you know, there's this really broken business.

[275] So this is now the time when virtualization is just exploding in the enterprise.

[276] OpsWars probably is the market leader in data center automation competing with Blade Logic at IBM.

[277] You know, HP had a business.

[278] This is kind of five years after the pivot.

[279] And as you said, in 2007 now, virtualization is finally a thing.

[280] It is.

[281] And you know, when you look at that, what that really means is that all these kind of human methods, right, the manual ways of now automating data center management end -to -end start, you know, to break down, essentially.

[282] You can't scale human beings indefinitely.

[283] And so there's this incredible froth and excitement over this automation market.

[284] And HP had acquired a couple companies.

[285] They acquired a company called Radia.

[286] They had acquired a company which did, you know, server, kind of like opsware server automation, but they did client desktop management as well, and they'd acquired a storage product called App IQ.

[287] But really, you know, after spending probably $100 million, having 200 engineers on this problem, we're fifth in the market.

[288] And so, you know, my, you've all said to me, my boss, the head of products at Mercury, said, hey, you know, there's a lot of heat in the sales organization about this.

[289] Customers want a solution from HP and we're losing a lot of deals.

[290] You know, you're kind of my glassbreaker.

[291] You want to go in there and figure it out.

[292] And it'll be a great opportunity for you, great exposure.

[293] And so that's kind of how I got in a position where I needed to think through a strategy, which ultimately led to acquiring opsware.

[294] Yeah, did you, I might be skipping ahead here a little bit, and then David could take us back, but it's a perfect tee -up for how did you do that build versus buy?

[295] How did you do that calculation?

[296] How was that done in a company like that?

[297] Yeah, you know, it was kind of interesting.

[298] So I took over the, agreed to do it, took over the business.

[299] And two weeks later, we had this I don't even know what we call it, a quarterly business review, QBR.

[300] And I'm supposed to be updating, you know, the head of software, Tom Hogan and Deb and Yuval, kind of all the execs of software on our strategy.

[301] And I don't, I just took over.

[302] Like, I don't know what our strategy is.

[303] And so I just kind of went back to first principles.

[304] And so to me, first principles are what our users want to do and what's happening in the market.

[305] And so I kind of interviewed everybody in the team.

[306] And I talked to the analyst and I got some basic data.

[307] And the math to me was incredibly clear.

[308] So when I looked at it, you know, we had 200 engineers on something where we were, you know, generating whatever, 20 million in revenue.

[309] We're fifth in the market.

[310] And when I looked at the first three players, so to me there's either emerging markets or consolidating markets.

[311] And it's important to know what market you're in.

[312] And when I looked at that, I thought, well, gosh, you know, between Opsware, market leader, Blade Logic, second player, IBM, who'd done an acquisition, 80 % of the market is in the hands of three vendors.

[313] Well, that's not an emerging market.

[314] That's a consolidating market.

[315] And I, so that's kind of question one is where are we at in the market evolution.

[316] And question two is who are we as a company?

[317] And, you know, there are companies who can disrupt a market that's consolidated.

[318] And that's, you know, Mercury could have done it if we wanted to.

[319] But my point of view is that, you know, HP at the time, and still, by the way, probably is, is a channel company.

[320] And what they really have is just like IBM is an incredible channel.

[321] And what they're great at is selling good software to companies who trust them and delivering it.

[322] And what they're not good at is building new things from scratch.

[323] And so a second part of my calculus was, you know, Sun Su says, you know, if you know yourself and you know the enemy, you'll be victorious in a thousand battles.

[324] We're a big fans of Sun Su on this podcast.

[325] I'm a huge fan.

[326] And so my second rationale was in a consolidated market, there is no path for a company like HP to build its way to victory.

[327] So you're only left with buy or.

[328] or exit the market.

[329] And you think if it was an emerging market, then HP would have had a chance at building their own, but still would be typically worse than a startup?

[330] It would have been almost impossible for that to happen.

[331] But yes, I mean, in theory, we could have had a chance.

[332] And you probably would have taken a different strategy in that context, right?

[333] But so that, I mean, I actually was given a very simple problem.

[334] It was nothing really complex about answering that question.

[335] I mean, there's more to it, but that's a same.

[336] essentially the math.

[337] And so, and, you know, and, you know, even more, if you looked at it in the context of the whole portfolio, you know, why would you invest so much engineering for so little return?

[338] Because, you know, the other part about software, which we all understand and valuation, is that the only players that make any money are the number one or number two player in the market.

[339] So, so even if there was a path for HP to become from five to four or take out IBM in five to three, profitability goes to the winner.

[340] And so, so, you know, and so, you So you lose money indefinitely on a software business unless you become the dominant player and then you make insane profit.

[341] And to me, if there's no path to number one or number two for you based on who you are, you know, that's really when you need to look at a buy solution.

[342] And so that was really, I think I presented five slides.

[343] It was very concrete.

[344] I probably, I also, by the way, spent a bunch of time interviewing salespeople and trying to understand how important this was.

[345] meaning, you know, how often was it coming up in deals?

[346] You know, what was the channel relevance, right?

[347] Because the other piece of it is if we did a deal, can we monetize?

[348] Are we talking to the people who'd buy it?

[349] Do we feel like we could have gotten that money that went to Opsware, IBM?

[350] And that was maybe the last piece of the calculus was the channel fit was very high.

[351] So HP at the time had many brands, OpenView being one of the most famous ones, that we were selling to the operations teams.

[352] So we had a very experienced channel.

[353] selling to the same buyer that would be buying Opsware or buying Blade Logic.

[354] And when you really step back and look at that math, it's pretty obvious that it has to be an M &A scenario or you should shut the business down.

[355] Right.

[356] So that was phase one.

[357] But you probably did enough calculus on what does this market look like in five or ten years where it was like we can't afford to not play in this market.

[358] Yeah, I mean, that's all the obvious math.

[359] I mean, yeah, I guess that was implied in my head.

[360] I mean, I think probably if that didn't make sense, HP wouldn't have already been in the space.

[361] So maybe that's why I didn't reference it.

[362] You know, I think it was pretty...

[363] This is a future of the data center, right?

[364] I mean, virtualization is now...

[365] I mean, I don't know that there's any data center probably in the world that doesn't at least have some degree of virtualization now.

[366] Oh, yeah.

[367] Oh, and by the way, now it's become containerization.

[368] So if you had won this battle, in theory, you have a very strategic control point.

[369] So to me, that goes to the...

[370] Now you're in the second question, which is, okay, If it's either go buy the winner or shut your business down, you've asked the next question, which is, is this strategic land?

[371] Do we have to own this land?

[372] Is it a strategic control point to owning the future disruption of the enterprise?

[373] Or does it, is a strategic to my buyer to the point where if I don't have this, I undermine other businesses.

[374] And you've kind of.

[375] And the buyer being the end customer here.

[376] The HP is selling to.

[377] Right.

[378] And so, you know, you guys have already made the argument.

[379] It's pretty clear that, you know, our actual.

[380] Uber theory at the time was that for IT operations folks, automation and monitoring would ultimately converge.

[381] And so the winning vendor for IT operations wasn't just the winning vendor who had HP OpenView, but it was the one who had the best automation and the best monitoring.

[382] And when you think about it at that level, by the way, then your competitors are very few people.

[383] You're competing with HP and with BMC and CA.

[384] And so the number of people who could actually, if that's really the winning strategy in IT operations, you know, how many people are positioned well to compete with us?

[385] And so we really thought that if we did this deal, it was us and BMC competing to dominate IT operations.

[386] And, you know, in light of that, you can see why the buy decision became very clear that we felt it was strategic land, not just because of the immediate opportunity around, you know, virtualization and kind of the core automation problem, but our hypothesis that it would become a converged solution and that that would actually strengthen our already dominant Open View business, right?

[387] And that it would be a one plus one is three in the broader IT operations business.

[388] So you can see what drove, you know, from our point of view, we called it a coveted asset.

[389] We felt that OpsWare would be, you know, not just bringing the Opsware business, but it would be affecting a much larger existing business within HV.

[390] Yeah.

[391] So you do end up buying it in July 2007 for $1 .6 billion.

[392] And after the pivot five years earlier, in the public markets, the public market pivot, what then became Opsware was trading for $28 million of market cap, which was $40 million less than the amount of cash that they had in the bank.

[393] So they had $60 million or $70 million of cash in the bank.

[394] and they're trading for $28 million.

[395] So five years later, incredible turnaround and achieve an exit that's 50 times that.

[396] Wow.

[397] What was it like after you bought them, though?

[398] I mean, from an integration process and a culture, I mean, this was a team that had been through the fire twice.

[399] And now they're part of HB.

[400] Absolutely.

[401] I want to know that.

[402] And Michelle, the one thing I've really been like with, holding back from asking is, okay, so you make this presentation, and it's five slides, and you make the decision, like, what logistically happens after that?

[403] Like, you shoot an email to, like, you know, Ben at Opsware?

[404] Like, how does that happen?

[405] Yeah, yeah.

[406] So there's actually two interesting thing that happens, if you don't mind before we get to the integration.

[407] So the process, obviously, the executives have to kind of come to some consensus that they agree to that.

[408] And there was, you know, quite a lot of discussion.

[409] I wasn't part of, but where, you know, the head of software talked to his head of sales and so kind of validating, hey, this is important.

[410] You know, hey, we're seeing them in all the deals.

[411] So, you know, the executives needed to go and both think about it as well as kind of validate the data I put forward to them about how important this was going to be.

[412] So, you know, it took some time for us to get kind of organizational alignment on the state of the market and, you know, how key this could be.

[413] And, you know, honestly, that was, there was not that controversial.

[414] I think, you know, is really clear that we needed something that customers wanted us to have a product.

[415] The interesting discussion was then, who do you buy?

[416] So kind of before you get to the buying ops where there was an alternate, you know, a vendor.

[417] And so Blade logic, right?

[418] Which BMC did buy.

[419] Which BMC did buy, right?

[420] So, you know, the interesting thing about that is, you know, you don't email.

[421] So what happened is someone from CorpDeb was assigned to us, right?

[422] So Sandeep Jory at the time was running corporate development.

[423] and he kind of took ownership of the project on the corp dev side.

[424] And I wasn't, you know, actually that involved in that, not in that piece of it, but, you know, I wasn't on all the email chains where they're emailing been.

[425] I was in most of the meetings.

[426] I did all the technical due diligence.

[427] So you kind of start these threads.

[428] And we ran our threads in parallel.

[429] So we were talking to both ops where in Blade Logic.

[430] And, you know, that involved, you know, financial due diligence, customer reviews, technical diligence.

[431] It was pretty fascinating.

[432] In fact, once we had decided our vendor, I was actually on site.

[433] We were on site during their sales kickoff, which was a little known fact.

[434] And I, in fact, couldn't leave the room.

[435] So everybody else was allowed to leave.

[436] But there were so many Mercury people at Opsware that people were worried that if I left, everyone would know who I was.

[437] So there was quite a lot of drama to that.

[438] But look, the net of, you know, why YHP versus or YOPSW versus Blade Logic?

[439] To me, it boiled down to what do you need to buy and how many acquisitions can we execute.

[440] So there's kind of a little known wrinkle here, which is while they started as a server automation company, that was the Loud Cloud Heritage.

[441] Ben's vision was to automate the entire data center.

[442] So they did acquisitions to acquire a runbook automation technology from a company called I Conclude that was based in Seattle, actually.

[443] And they bought a network automation company.

[444] I actually believe that one was based in Seattle as well.

[445] So they made a couple acquisitions to extend their product line from server automation to what they call data center automation.

[446] And our theory was actually slightly bigger than that is we felt that what customers wanted to do was deploy services end to end.

[447] And so the winning vendor would be executing a product strategy to bring, you know, desktop, server network, storage, all of the automation elements into a suite to automate application deployment.

[448] so that, you know, servers on some level are just one tiny piece of an end -to -end IT service.

[449] So that was the strategy we were executing.

[450] And when you look at that, we had a client product already at HP, and we had a storage product from these acquisitions we had.

[451] And so really what, you know, there was a lot of differences from a market share perspective.

[452] Clearly, OpsR was ahead of Blade Logic.

[453] And that's very attractive.

[454] You kind of de facto always want to buy the market leader.

[455] Yeah.

[456] However, at the time, Blade Logic had a better product.

[457] in opsware.

[458] So that is the downside of this kind of loud cloud.

[459] And I would say better product in the sense of usability.

[460] So where they lost deals, it was on usability.

[461] Where they won deals, it was on enterprise scale.

[462] So there were product implications to this kind of pivot that they did.

[463] And this is to preview tech themes a little bit.

[464] I mean, this is something that for listeners that aren't as familiar with enterprise technology, you know, it's just such a hard thing initially to get your mind around.

[465] Steve Jobs talks.

[466] about this.

[467] In the enterprise, it's not always the best product that wins.

[468] You know, Opsware was the market leader, but as you're saying, they didn't have the best product.

[469] They had the best sales motion.

[470] Yeah.

[471] Well, and at least in server automation.

[472] So, you know, their strategy was to basically move to the suite motion.

[473] So they had the best suite.

[474] Blade Logic did not have other products.

[475] They had a partnerships to solve that problem.

[476] So, you know, if Opsware could, you know, could move the buying criteria to being data the center automation, they won, because it isn't just head -to -head product to product.

[477] So, you know, our assessment was, number one, we wanted to buy the market leader and that having the, you know, first mover in our channel, best current position in what we thought was one of the best channels in the world is the best combination.

[478] But the second piece of math for us was that if we had gone after Blade Logic, we would have had to do three additional acquisitions.

[479] And we felt that the risk, even though if it would have been cheaper, we thought that actually the likelihood of our ability to successfully acquire four companies was significantly less than one.

[480] And if you look at big companies buying, you know, small companies, in many cases, the medium -sized ones do the best.

[481] You know, they're big enough that they can be put in in the channel and it works.

[482] And in many cases, these little technology tuck -ins, you know, a $10 million acquisition is harder to make work than a bill.

[483] billion dollar acquisition because there's not critical mass of people and ideas to teach the rest of the company how to sell.

[484] So the two pieces for us on OpsWare were, I guess, three, strategic alignment, they had the full suite, they were the market leader.

[485] And even if they had some product efficiencies, we felt that we were much more likely to be able to execute that successfully than Blade Logic plus three others.

[486] And so that's kind of the math that led to the end of us saying, you know, our preference, our top partner, you know, our top partner, you know, top target would be Opsware versus Blade Logic.

[487] And, you know, we continue talking to Blade Logic to the end.

[488] So if we had lost Opsware to BMC or to whomever, you know, we would have had a fallback plan.

[489] But we had a clear preference.

[490] And paid a premium for it, frankly.

[491] So now I want to jump to the culture and the people piece now.

[492] I mean, that all makes, that is bulletproof logic there.

[493] But, you know, you read a hard thing about hard things or you listen to Ben or you look at Andreessen Horowitz.

[494] And, you know, the first thing that comes to mind is not, you know, HP.

[495] What was it like, you know, integrating this team?

[496] Well, you know, interesting.

[497] So, you know, one, if you've read the book, Ben has a management technique called Freaky Friday.

[498] So I thought, hey, I'm going to run the integration and they're just going to give me some special projects and send me off in the sunset.

[499] You know, I didn't have a product.

[500] I didn't expect to have a product ownership at that point.

[501] So Ben actually swapped me and his head of product at the time.

[502] Eric Vishria.

[503] So Eric took over ITSM.

[504] Eric is now a benchmark capital as a VC and found that his own company kind of in between his stinted HP and that and big joining benchmark.

[505] But, you know, Eric joined the ITSM team and took it over.

[506] And Frank Chen, who's who was the product management half of that partnership.

[507] And is now at Andrews -Horowitz.

[508] And is now at Andreessen Horowitz, moved into engineering to help under Jason Rosenthal, who was the head of engineering there at the time.

[509] And so Ben gave me product.

[510] And that was an incredible.

[511] So he calls it Freaky Friday where he swaps executives.

[512] Oh, like the Jamie Lee Curtis movie.

[513] Yeah.

[514] That's one of his management techniques that he wrote about.

[515] And I think so, and then, and I worked directly for him.

[516] So that was pretty amazing as an opportunity and experience.

[517] I think a part of why it worked is that I was at HP.

[518] So, you know, I was a mercury person where the DNA is much closer to opsware.

[519] You know, many, many, by the way, like that silly sales kickoff story.

[520] There were many Mercury people at HP.

[521] You know, Mercury was a very Israeli company, very, very aggressive, very direct.

[522] You know, we were, you know, very customer focused and winning was incredibly important.

[523] So a lot of external values that I think mapped really closely to the ops for our teams.

[524] So I think one piece of it was, you know, he put someone in charge of the integration who had the same cultural values as his own team.

[525] And I think that made things easier.

[526] But, you know, for sure there's culture friction.

[527] I mean, you know, as an example, we're going through the integration, the formal integration process.

[528] And I remember being on the phone with the IT organization.

[529] And the IT organization is insisting that we have to shut down all these non -approved apps that OpsWare has.

[530] And one of the non -approved apps, I'll give you two that are just outrageous.

[531] One of them happened to be the license key generator for all of the OpsWare software.

[532] And we had to shut it off at the time of acquisition according to IT.

[533] And I'm like, someone helped me understand why we would, you know, spend $1 .6 billion and then basically be unable to sell and turn on any of it.

[534] You know, or the other one was, they wanted us.

[535] There was no, like, grace period of like we should spin up something else to make it.

[536] So, you know, you're in this like, you know, six month, whatever it was four months.

[537] I don't even remember.

[538] It was kind of like dog years.

[539] You're in this integration, which is super intense, but you have this deadline.

[540] And, you know, IT had very strict objectives.

[541] I mean, Mark Hurd was running HP at the time.

[542] So that was Mark Hurd's HP.

[543] Second, they had a source control standard within the company.

[544] And, of course, they were like, well, you have to migrate all the source control and source code into this new.

[545] This is pre -GitHub.

[546] Yeah.

[547] And as you know, like, you know, in that time, you know, that was just almost impossible.

[548] So there was a lot of these kind of weird operational hurdles that I wouldn't have anticipated.

[549] You know, that's kind of a whole class of problem that you have to deal with.

[550] You know, again, I feel like I was very lucky because, you know, I. was kind of a liaison between, I probably absorbed a lot of that weird cultural friction for those guys in that sense, at least during the integration.

[551] And actually at the time, Scott Cooper was my partner on the Opsworth side.

[552] So he's, he's now the, I guess, COO, you know, running all the operating arm of Andreessen Horowitz.

[553] But he was a great partner on the opsware side.

[554] So I felt, for me, working with them was very easy.

[555] And a lot of my job was basically trying to prevent the big mechanism of HP from, you know, making unnatural things happen.

[556] But, you know, once we had them integrated, I think, you know, then there was, then there was a lot more interesting.

[557] So you kind of get this middle period where you're dealing with all the organizational administrativeia.

[558] That's frustrating.

[559] You know, I think one thing we did well in that period was we took market share.

[560] So we kind of, you know, really sold the heck out of opsware in that period and gained a pretty good advantage over Blade Logic because at the time, you know, BMC hadn't yet announced their deal with Blade.

[561] And then, you know, as we formally integrated them, we had all of the challenges you can imagine.

[562] So the software, the sales organization, you start to break up the teams, right?

[563] So instead of being Opsware now, engineering is part of Ben's organization.

[564] So Ben took over products and engineering for HP software.

[565] And so, you know, in some level, that's a little safe.

[566] You know, the sales organization got put under some of the sales leaders as overlays.

[567] And to to be honest, that's an area where if I look back, gosh, I wish we had done a better job.

[568] So, you know, the good news is we had these experts, these black belts, and an ops were was global, so we immediately got traction globally.

[569] But, you know, overlays are a hard thing to make work.

[570] And I feel like, you know.

[571] And you say overlays as in there's HP management on top of each of the sort of.

[572] Sorry, not being clear sales overlays.

[573] So generally speaking, when you, you know, put a new product that's hard to sell, there's a lot of IP and how to sell it.

[574] And so you take these sales organization of Opsware and who used to just sell Opsware and now they're basically what we call overlays, they work with the HP people because the HP people already own all those accounts and they sell this huge portfolio of software, but they don't know Opsware.

[575] So you have this kind of digestion period where you're having, you're trying to disseminate the expertise of the acquired company into your sales organization.

[576] And eventually you want the motion to be.

[577] be that it's fully absorbed and everybody's fully trained and you can sell.

[578] But, you know, the biggest question is how do you train and enable that sales organization to be even half as effective as an opsper person was in, you know, objections and challenges and competitive landscape and so forth.

[579] And so that presents just its whole own set of challenges.

[580] I'm sorry.

[581] Oh, I was going to say, I think this is a big thing for listeners to understand, you know, when it's easy to look at this from the outside and say, you know, okay, like enterprises is about sales channels and sales motions.

[582] Like I sort of get what that means.

[583] But like this is it in practice.

[584] I mean, the opsware sales team was, you know, sort of a finely tuned machine to sell data center, you know, automation and management.

[585] But the HP sales team is selling all sorts of things, a whole portfolio of everything you could imagine to CIOs at companies.

[586] And so now Opsware is going to be just a small piece of that portfolio.

[587] And so you need the HP sales team to digest that and understand how to sell Opsware best.

[588] But it's not just about selling Opsware.

[589] It's about selling everything.

[590] Yeah.

[591] Yeah.

[592] So you have a huge enablement challenge.

[593] And that, you know, that was, I love that.

[594] You know, I ran the product management and product marketing organization for the combined business, what we ended up calling BSA.

[595] So it was business service automation.

[596] We kind of did away with the DCA term.

[597] But it was a phenomenal challenge.

[598] I mean, we did so much training.

[599] I actually flew in the year after that acquisition.

[600] I think I flew 350 ,000 miles worldwide.

[601] Wow.

[602] You know, visiting customers, doing deals, trading reps, you know, it was pretty phenomenal.

[603] And we saw huge growth.

[604] You know, it's been a long time for me. It's been a decade.

[605] But, you know, I don't remember.

[606] I think by the time I left, we'd seen, you know, 350 % growth in the business.

[607] So from that perspective, you know, talk about a huge, you know, it's at least a huge early down payment of success on your, on your vision of kind of the value of that technology.

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[629] You know, we've got a format to this show that at some point we'll move here into categorization, but I'm curious looking back on it all where the state of, you know, data centers are today and with the rise of cloud services and the major players being Google, Amazon, Microsoft, or, you know, you can make arguments about that, but you don't often hear HP thrown around in there.

[630] And what do you think happened in the last decade from the world of, you know, data center automation into business software, business center automation?

[631] Business service automation into the world that we have today.

[632] And, you know, why isn't HP one of those big three, big four?

[633] Yeah, interesting.

[634] Well, I mean, I look at the natural successors of Opsware.

[635] And I think of companies like Puppet and Chef.

[636] And by the way, how fascinating, you know, one's local in Seattle here, but they're both going to be public companies.

[637] I don't remember if Puppet already filed.

[638] But, you know, it's pretty clear that those companies are on their way.

[639] Yep.

[640] So, you know, the inheritors of the problem and the market opportunity are those companies.

[641] And, in fact, it'll be very interesting to see, you know, whether, you know, dockerization brings a new generation, a third generation, or whether dockerization just accelerates Chef and Puppet.

[642] They're able to capitalize on that motion.

[643] But, you know, why not HP?

[644] look, it's very hard for big companies to innovate.

[645] And here's the reason why, you know, innovation number one is a people thing.

[646] So you have to have a really high quality of thought.

[647] And that's all people.

[648] And at least at the time I was at HP, it was interesting.

[649] It was a very, you know, Herd had a very manufacturing mindset.

[650] And manufacturing companies look at people is very interchangeable.

[651] Software companies have this idea of the 10Xer, where, you know, the 10x developer can do things that no one else.

[652] can do and the 10x product person can see things no one else can see.

[653] And it's really true that there isn't a scalableness to the way software works inherently.

[654] Like you can't replace Steve Jobs with, you know, a hundred other people and get the same work that Steve Jobs did, right?

[655] It just doesn't work that way.

[656] So, you know, when you look at kind of our software organization or a software business, one, you need to retain those top people.

[657] And I think big organizations have just an incredibly hard time doing it because of a culture mismatch.

[658] You know, my level of patience for the HP culture was very low.

[659] And by the way, my culture fit with them was very low.

[660] You know, I swear too much for HP, for example.

[661] But so you get that, like, weird DNA mismatch.

[662] So that's kind of one big challenge.

[663] I think the other big challenge is that institutionally, you need courage.

[664] So I actually think Mercury is an example.

[665] There are big software companies that can innovate and can, you know, not have a disruption, you know, destroy their business, but take advantage of it.

[666] chef and puppet will as an example.

[667] But, you know, Mercury went from, you know, zero to three thousand people, zero to a billion.

[668] So you can do it.

[669] And I think the second thing required besides, you know, these 10xers in your key roles in product and engineering and sales is you need the courage to basically bet before the data is obvious.

[670] So, you know, ops was an unusual situation where the product, you know, by the way, their vision was, you know, whatever, 10 years ahead of its time really.

[671] So timing might have been a problem for them.

[672] But the vision's dead on and product was close enough that they could go monetize it.

[673] And they ended up, their timing was right on virtualization.

[674] So talk about the confluence of events.

[675] You know, I think when you're in a big company, the second challenge that's really hard is that disruptions often sneak up on you.

[676] So if you're HP and you own Opswear and you've won, do you really have anyone in the company who can feel that Docker's coming and know that existentially Docker is a threat to your control or that, you know, whatever it was?

[677] I don't know, I wasn't close enough to the business around the chef and puppet time frame.

[678] Yeah, I actually probably was DevOps, right?

[679] So the fact that like development and ops were converging represents an existential threat to your business.

[680] So, you know, the second challenge a big company has is not only do you have the right person, but that person would see that threat coming and be able to mobilize the leaders to move.

[681] And so, you know, how do you, in a big company you need that, the geniuses, you need them to see far, like with almost no data.

[682] And you need leadership pool bet based on that.

[683] And that's, I mean, to be honest, you know, most executives and big companies are used to waiting until the entire PowerPoint deck is 50 slides and all the data is there.

[684] And the decision's safe.

[685] And you have Microsoft, not under Satya, but maybe that's Balmer's Microsoft.

[686] And you miss the entire market.

[687] And so I think that's, that's probably why it's not HP and it is puppet.

[688] Because it's much more than the software is the outcome of the people and the process the leadership used.

[689] Right.

[690] And that, Once that falls apart, it's almost impossible to replicate.

[691] Oh, man, I'm just hitting here.

[692] This is going to fit in so perfectly with my tech theme.

[693] Should we move along to get there?

[694] I definitely want to come back and talk about what it's like now having been on your board at UserMind.

[695] But let's finish out Opsware at first.

[696] So acquisition category, for me, this seems pretty clear.

[697] it's a product that you bought to put into the HP sales channel.

[698] So to me, this is a product acquisition.

[699] Yeah, and, you know, I've been torn between product and business line, and we sort defined business line as self -sustaining, independently functioning product that comes with sales and vision that just, you know, may not be independently broken out to shareholders as a separate, you know, a separate line item, but basically functions as its own independent business.

[700] It seems like after hearing you talk and after David asserting product, I'm closer to product now and I'm thinking there's much tighter integration much more quickly and it was not really an independent business, but we'd love to hear your thoughts on that.

[701] Yeah, no, not really.

[702] I mean, you know, Ben took over the whole HP software business.

[703] I mean, he became the head under Tom Hogan of product and engineering.

[704] And we definitely had the opsware organization separate for a short period of time.

[705] But no, the integration.

[706] was incredibly rapid.

[707] And the purpose of that was to inject the DNA into the broader organization.

[708] So, you know, there was a larger transformation happening within HP software at the time, right?

[709] You know, the acquisition of Mercury was, I think, the first and then, you know, Opsware and they did others after I left, you know, autonomy, not being not being a great example.

[710] But there was a bunch.

[711] And there was an Uber strategy and overarching strategy there that they were trying to transform the culture.

[712] and transform the software organization.

[713] So the integration strategy was very much driven by this overarching vision that they had about kind of bringing in a bunch of fresh DNA.

[714] So, no, it was not run as a standalone business except for the period during the integration when that's required.

[715] Cool.

[716] Moving to, David, go for it.

[717] Well, I was going to say, then we have what would have happened otherwise.

[718] I actually, I think we probably covered that pretty well with the discussion of BMC and Blade Logic.

[719] Yeah, I have one thing to sort of posit on that.

[720] And Michelle, if you guys have made the decision that, you know what, we're not going to buy, we're not going to build, we're just going to be done in this market, would HP be in a significantly different position today?

[721] Well, you know, I've been gone so long.

[722] It's a very, very hard question to answer.

[723] Look, I think, I mean, I guess if I had been there and the answer was we didn't want to do or Blade, then I think I would have proposed that we take all the engineers, I would shut down the DCA business and I would have proposed essentially shooting for the next product and taking that engineering team and building a converged automation and monitoring product with every engineer from the team and basically give up the land for the current iteration and wait for the next disruption and bet that we'd be on time.

[724] I don't know if that would have happened or if it would have been successful, but I believe I wouldn't have gone down without a fight.

[725] I would have, you know, fought for what I thought was the right thing for the company.

[726] Right.

[727] Yeah, it's very interesting tech theme where, you know, this is, we've seen this multiple times with multiple companies, but when you miss one hill, it really gives you an opportunity to see the world from a different perspective and be better at taking the next hill and be better at, you know, targeting exactly what customers want.

[728] And there's a little bit of desperation there.

[729] I mean, Apple and the iPhone, there's tons of examples of, mother of invention.

[730] Yep, yep, we missed this war and or we missed the battle, but hopefully we hit the next one.

[731] Yeah, I mean, loud cloud into opsware.

[732] Yep.

[733] Should we jump into tech themes?

[734] Yeah, yeah, yeah.

[735] Ben, you want to kick it off?

[736] Oh, that was the main one that I wanted to point out.

[737] So why do you go for it?

[738] Okay.

[739] Well, I just loved, I was smiling, grinning ear to ear, Michelle, when you were talking about timing and management.

[740] And this is, for me, what this story just illustrates so well is like the absolutely critical role of timing in technology, both consumer and enterprise.

[741] I mean, LoudCloud was 100 % the right product.

[742] You know, I mean, it was AWS before AWS.

[743] And AWS is, one of the probably top three biggest and most important products in technology today, but the timing was wrong.

[744] And I think about, you know, I heard, I can't remember where I heard this, but I think Sequoia, the venture capital firm, did a study, you know, a number of years ago about what is sort of the most important factor for their investment partners in how the quality of their decision making and the quality of their investments.

[745] and they concluded that it was it was timing it was getting the timing right in a market but what I think you you said that so that was what I had down as my theme for this episode but I think what you said there's more to it than that and that's that the role of talent in technology both from a product and a management standpoint is managing that timing like you know it would have been so easy at LoudCloud to say, like, well, we got the timing wrong.

[746] We're done.

[747] But what Ben and Mark were able to do was say, we got the timing wrong, but we're going to get the timing right on this other piece of it, and we're going to pivot into that.

[748] And I think that's what, like, you know, talking about 10x folks in tech, that's like what it's having that vision and being able to manage timing in a market that's really, you know, what it comes down to.

[749] I think both in consumer and enterprise.

[750] I mean, yeah, look, I think timing is just, it's the one law you just don't control.

[751] You know, I think it's interesting.

[752] I think Mark Andreessen talks about it.

[753] You know, good market, bad team, they do all right.

[754] You know, terrible market, great team.

[755] You're kind of screwed.

[756] And so, like, what trumps what?

[757] You know, you've got kind of, what is the idea good enough?

[758] How big is the market, you know, timing?

[759] timing and then people.

[760] And so I always say, like, what's the, what's the why?

[761] What's the idea?

[762] What problem you're solving?

[763] Why?

[764] The second question is, why now?

[765] Why is it inevitable now that this idea should matter or be more relevant or actually be a business?

[766] And the third part is where team is in is like, you know, what's the likelihood you have to execute into that?

[767] And then it's interesting, you know, I think on the people front, it's, you know, if you go into Ben Horowitz's office within Andresen, he has people on the wall, pictures of people, and it's scientists on one wall and boxers on the other.

[768] And we're both big boxing fans.

[769] But he would summarize it this way, which he says entrepreneurship is the intersection of intellect and courage.

[770] And so I think it's not just seeing that the thing is happening.

[771] It's having the courage to fight for the deal, you know, in the case of an acquisition or fight for, you know, the strategy or fight for your life in the company if you're failing.

[772] And I think that can't be underestimated right?

[773] Is that is the level of grit and kind of I call it a little bit of irrationality that's required in that human capital to be successful.

[774] Wow.

[775] I love that phrase.

[776] It was that that took a negative equity value public company at the time of the pivot to you know, a $1 .6 billion acquisition, right?

[777] Yeah.

[778] I think Ben and it's a great man. There's no question about that.

[779] And one of the most genuinely humble and nice people I've ever met in my life, which just is doubly incredible.

[780] That's awesome.

[781] All right.

[782] Should we grade this?

[783] Yeah.

[784] Yeah.

[785] So Michelle, we were talking before the show and you said, yes, indeed, I will help great.

[786] So I'm curious, you know, looking back on this and sort of taking yourself out of the equation.

[787] You know, how to go?

[788] I would probably give it a B. You know, I think we were able to get, you know, a huge revenue boost.

[789] You know, we essentially accelerated the market dominance of ops where I think the reason I wouldn't give it an A is I don't think we saw the strategic long -term vision come to fruition the way it certainly could have.

[790] And I think the biggest difference is people.

[791] You know, you lose Ben, you lose me, you lose Mark Cranny.

[792] You know, those are the people who would have made that next wave of value creation happen.

[793] So that's my perspective.

[794] Although I guess maybe it's an A plus in the sense that if we hadn't acquired Ops where Mark and Ben wouldn't have founded Endrescent Horowitz.

[795] You wouldn't have founded user mind.

[796] And I think they've disrupted the valley.

[797] So maybe it's an A from that point of view.

[798] David's pulled that card before where the actual financial outcome for the company was something, but the goodness for the world was something else.

[799] And maybe I meant B from HP's perspective, you know.

[800] Yeah.

[801] And that is how we grade on the show typically is how good of a decision was.

[802] it for the acquirer to make the decision.

[803] And David, I think the time when you pulled that was PayPal Mafia.

[804] Yeah.

[805] Well, and it's like, I think it's completely relevant here again.

[806] I mean, there is an opsware mafia.

[807] You know, you talked about Eric at Benchmark and, you know, the whole, practically the whole Andreson Horowitz team, or at least the initial team, you and many other.

[808] And we're sitting here in the beautiful user mind office looking out over the skyline of Seattle.

[809] So definitely.

[810] Well, and, you know, locally in Seattle, obviously Apteo was their first investment.

[811] So that's where I was there, had a product.

[812] And that company has since IPOed.

[813] And, you know, Sonny Gupta, that CEO, Bennett acquired his last company, I conclude.

[814] So, I mean, there's many more, right?

[815] You know, their initial investment in Octa and, you know, now Signal FX, where that's one of the CTOs of Opswear is now the co -founder there.

[816] And Carthick Rao, Eric Vichrya's roommate, is the CEO.

[817] CEO, and it just, and it goes on and on and on.

[818] Wow.

[819] Yeah, it's pretty crazy.

[820] Wow.

[821] It's totally crazy.

[822] Well, I can't argue with those grades.

[823] Yeah, I mean, I have far less perfect information.

[824] So B sounds great to me. But before we jump into carve -outs, you know, I'm sort of dying to talk about, you know, given all that, like, what's it like now on the other side of the world where, you know, bends at Andreessen Horowitz and he's on your board.

[825] Well, number one, I mean, Ben's an incredible board member.

[826] So, you know, taking away user mind and just my personal journey, he's phenomenal.

[827] I think their whole philosophy, so now, you know, obviously at APTIO, I was, you know, in the leadership team, and I was part of the board meetings and would present to the board.

[828] And so I got to see that board.

[829] And, you know, now I've got my own board.

[830] But, you know, it's really striking to me this thesis that they have, even more broadly than Ben, that operators, former CEOs make better board.

[831] members.

[832] And for me, you know, I don't know if that's true broadly because I'm working with Ben, but I feel that Ben's experience as a CEO helps me, you know, every day, every week, every month, every board meeting.

[833] He's been just incredibly, you know, just been invaluable in my development as a CEO and helping me kind of think about how to grow the company on every level.

[834] And, you know, you think about board members as being really valuable in the context of a board meeting, you know, reviewing financials and helping you think about when to scale what function and when do you add what executive and, you know, kind of how are you doing from a customer traction point of view?

[835] And he's phenomenal there.

[836] But, you know, Ben to me is as or more valuable to a CEO in your one -on -ones where I might be talking with him about a management challenge or how do you run a staff meeting as you grow the company or, you know, how do you think about different inflection points in your own leadership style and the way the business is changing and where do you spend your time and think about hiring your first exact, you know, how do you do that?

[837] And what's, what are you looking for?

[838] There's so many more ways that a board member adds value to as CEOs, both decision making and growth as a CEO, than the board meetings.

[839] And I found him to be, you know, and part of it is our relationship, I'm sure, because I trust him and he knows me very well.

[840] But he's just an incredible sounding board with such a wealth of talent.

[841] You know, I remember asking him as an example to share advice.

[842] I asked him when I was hiring my first executive, my first non -co -founder executive in the company, kind of like, what's the central thing I'm looking for?

[843] And I'll just generalize it because I don't need to talk about the specific role.

[844] And his answer was, an executive is someone who gives you leverage.

[845] I'm like, okay, that's the, actually, that is the ultimate truism.

[846] So if you're hiring as a CEO, a person, one of the things is they probably know more about their function than you, which means that it's very hard to interview them and know you're selecting the right person.

[847] But on the flip side, it also means that if that person joins and doesn't give you instant leverage, you've hired the wrong person.

[848] And talk about, like, I've never in my entire life heard anyone in like a single word.

[849] Distill it so succinctly articulate how to evaluate a hire and how to both pre, both before hiring them and as they've joined the company.

[850] And those, that's just a simple example of like one question I've asked him and the kind of response that I get.

[851] So I don't know if that's the type of information you're looking.

[852] for but yeah i feel blessed every day hey i learned something today yeah me too um well and it's just i mean this is something i've been reflecting on a lot recently you know as being in venture myself and you know ben and i've been doing this together too um you know really this is making the case for um you know as a venture investor being there's this concept of you know being a company builder and contributing to the building of the company.

[853] You called it adding value, Michelle.

[854] But, you know, and I really think, like, if you're not doing things like that, you know, then you're, then what are you?

[855] You're a stock picker, right?

[856] And does that even make sense in startups?

[857] Like, you can't pick stocks in startups.

[858] And if you want to, you know, earn returns for your investors and yourself, the only thing that makes sense really is, is to do, you know, approach this, this craft like Ben does, you know, and like Eric does, eventually.

[859] mark.

[860] And, you know, like many, many good VCs do, which is, you know, there has to be, and for you, I would imagine, that provides a hugely compelling value why you would want them on your board.

[861] Oh, yeah.

[862] I mean, well, you know, there's so many kind of elements to how you think about your board composition and I think what you're looking for.

[863] But, you know, if you can get a person who is, you know, that level of genius, right, who can contribute in such a fundamental way to value building.

[864] You know, let's not underestimate when, you know, kind of the value of the brand as well.

[865] So not just Ben Horowitz, but Andresen Horowitz.

[866] I mean, I think, you know, I remember in the early days of the company, engineers would say, you know, I'd be like, why did you take the meeting with us?

[867] And they'd say, well, you're an Andreessen Horowitz company.

[868] So, you know, the brand is also something that helps you build the company and separates you from other startups that, you know, helps you kind of be competitive in this war for talent, right, which is happening all around us in Seattle.

[869] And then, you know, I think just the particular expertise that that board member brings is something extremely unique.

[870] So I don't, I did not know Ben was going to leave and start a venture capital firm when, when, you know, he left HP.

[871] But it's shaped my life.

[872] I mean, he's the person who said to me, you need to go be in a startup.

[873] He's why I went to Aptio and joined.

[874] And in fact, at the time, he said, you know, you should just found.

[875] But I had never worked in a startup.

[876] So I wanted to go work for a serial CEO and learn something.

[877] And I'm glad I did.

[878] I mean, I think it's the right choice for me. I knew the right choice for me. But, you know, he fundamentally shaped my life trajectory.

[879] So if I shaped his by kind of changing his trajectory by the acquisition, he's profoundly changed mine.

[880] I mean, I wouldn't have known I'd be a CEO.

[881] I wouldn't have thought I would end up in startups.

[882] You know, I love product.

[883] I'm certainly a product person.

[884] But I didn't wake up at 23 thinking that's what I was going to do.

[885] So, well, what a great perspective.

[886] Great note to, to wrap this one up on.

[887] We do have our last final segment of carve -outs.

[888] And actually, this is a really good tee -up for mine for the week.

[889] Mine is Jimmy Iovine, the record industry executive.

[890] And co -founder of beats with Dr. Dre, who he produced as a music producer, was on the Bill Simmons podcast on The Ringer last week.

[891] And it's wonderful.

[892] And, you know, it's the music industry and the record industry and lots of great stories there from all the artists from all genres that Jimmy worked with.

[893] But he talks about kind of just that what you were talking about, Michelle, and like the sort of courage to go and do his own thing.

[894] and blaze his own path in the business.

[895] And he talks about this concept of like having fear.

[896] And like fear can be sort of paralyzing.

[897] And for a long time he was paralyzed until he found like this thing.

[898] And that was music and the music industry that like the fear kind of motivated him.

[899] The fear was like, you know, I fear that I'm going to miss out if I don't go.

[900] If I don't go and I, you know, capture this opportunity.

[901] He used the analogy of like, you know, when you're playing baseball.

[902] And like, either, you know, you're in the outfield and you could think, like, don't hit the ball to me, you know, you could be fearful of it.

[903] Or you could say, like, you know, hit the ball to me because I'm fearful like, you know, I'm going to make the play.

[904] Right.

[905] You know, if it doesn't come to me, I'm not going to make the play.

[906] Right.

[907] It's like an opportunity to succeed rather than an opportunity to fail.

[908] Yeah, it's great.

[909] Highly recommend.

[910] Huh.

[911] Man, I love the Ringer podcast.

[912] If, like, if you're listening to this show and you're thinking, I've listened to a lot of shows.

[913] And, you know, I've listened to a lot of episodes of Acquired.

[914] if there's any that was particularly good where I was like pumped up and like you felt like I was on my A game, it's because I listened to Bill Simmons before and I got Bill Simmons voice in my head and I was ready to go.

[915] So, you know, that's your carve -out.

[916] You can take that one, but I also recommend you listen the Ringer podcast.

[917] Mine is a software package called Starstacks.

[918] And I've been, it would be overselling to say I've been an amateur photographer.

[919] I've enjoyed taking, pictures for a long time.

[920] And especially I do these big backpacking trips every summer with my dad.

[921] And this time I decided to carry the extra weight and bring about a two and a half pound tripod out with me and try and do some star photos.

[922] And so this is super hard.

[923] And I was batted at four out of the five nights with either crazy blurry photos or like, you know, it was cold and the lens fogged or clouds rolled in.

[924] But there was one night where I kind of nailed it.

[925] And And so the process is wild.

[926] You leave the camera out on a tripod.

[927] You go to bed.

[928] You set an alarm.

[929] You wake up in the middle of the night like three, four hours later, and you go collect it.

[930] And you cross your fingers and hope for the best when you import it all later.

[931] And Starstacks is this incredibly cool piece of software on your computer that will take hundreds of long exposure photos that are taken over several hours and overlay them all on top of each other kind of automatically.

[932] So you don't have to do it all manually in Photoshop and really produce.

[933] some cool star trails.

[934] So if anybody's interested, we can link to that from the show notes.

[935] And I highly recommend StarStacks.

[936] That's all we've got.

[937] Michelle, thank you so much.

[938] Where can our listeners find you?

[939] Are you on the socials?

[940] Yeah, so Michelle Feaster at Twitter.

[941] We're at UserMind Inc. Both easy ways to meet, you know, kind of meet my acquaintance.

[942] You know, we're also on Facebook, obviously, as UserMind, and I'm Michelle Feister pretty much everywhere socially.

[943] Or Michelle, I use your mind.

[944] You know, if people are out there and you're an early founder and you're terrified, you know, I don't take every meeting because I'm super busy.

[945] But I feel like I've only gotten where I've gotten because so many people have helped me. So, you know, easy to get me. And, you know, if I could make time to help folks, I definitely will.

[946] Awesome.

[947] Our sponsor for this episode is a brand new one for us.

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[972] We're pumped to be working with them.

[973] You can click the link in the show notes or go on over to stat sig .com to get started.

[974] And when you do, just tell them that you heard about them from Ben and David here on Acquired.

[975] Listeners, um, listeners, um, listeners, check out the Slackacquire .fm, and we would love, love, love a review on iTunes.

[976] So thank you so much.

[977] Have a great day.

[978] We'll see you next time.